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Should I Get An Extended Warranty On My New Car?

Should I take out an extended warranty on my new car?
Learn all you can before making a decision. We have all the answers to your questions about extended warranties.

What is an extended warranty?

Every new car comes with a limited warranty to cover the first 36,000 miles on the car, or the first three years of ownership; whichever comes first. An extended warranty offers the owner extra coverage for a longer period of time or for more mileage.

Are they worth the price?

In most cases, extended warranties are not worth the cost.

Extended warranties add $1,000-$3,000 to the total cost of your car. You’ll likely never claim enough to justify that cost. According to a survey on the subject by Consumer Reports, more than half of car owners with extended warranty plans paid more for their coverage than they received in payouts.

When should I consider purchasing a warranty?

If the vehicle you’re purchasing is notoriously unreliable, you may want to consider taking out an extended warranty. Before signing, through, carefully read the contract. Your plan should offer the most extensive coverage possible.

It’s also a good idea to research the company behind the policy. Check online to see if the company is recognized nationally and has positive reviews. Lots of smaller, unknown companies can give you a hard time when you try to make a claim.

What else do I need to know about extended warranties?

There are several factors about extended warranties that are often overlooked by consumers.

First, most extended warranty plans offer limited protection. They may exclude repairs that are necessary from “wear and tear” on the vehicle, or they may only offer coverage if the car breaks down completely. They may also specify that you get your vehicle serviced by their designated mechanic.

Second, most extended warranty plans have deductibles that must be paid before coverage begins. Some of these plans have a deductible on every repair. This can mean paying a $100 deductible for every $200 repair you need.

Finally, ask if your extended warranty is transferable. A few years down the line, you may decide to gift your car to your teenager. Will you be able to transfer the policy to their name?

Are there any alternatives to extended warranties?

You can enjoy stress-free car ownership without an extended warranty by following these simple steps:

1. Choose a car that has a great record. Some models are notorious for needing frequent repairs. Avoid getting one of those.

2. Follow the manufacturer’s maintenance schedule. Regular checkups and maintenance for your vehicle can help you avoid major repairs.

3. Open a savings account at Citizens Federal Credit Union to use specifically for repairs. Deposit a lot now, or start small and progressively build it up. This way, you’ll have the peace of mind in knowing you have funds for unexpected car-related expenses.

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